Have you ever wondered
whether you can earn foreign currency when doing business in
Azerbaijan? Or whether you can pay your staff in cash or foreign
currency? What about repatriating funds or opening bank accounts?
Here are the answers to some of the most frequently asked questions
about foreign currency transactions in Azerbaijan.

Can a foreign individual
have a foreign currency bank account in Azerbaijan?

Yes. An individual may
open a foreign currency bank account and deposit or transfer
money into such an account without restriction. However, an individual
may only transfer money out to the country from which he / she
had previously remitted, transferred or carried it into the country.

Can a foreign company have
a foreign currency bank account in Azerbaijan?

Yes. Foreign companies
operating as Foreign Legal Entities (FLE) can open foreign currency
bank accounts in Azerbaijan. However, in order to open an account,
an FLE must prove that it was registered with the Ministry of
Foreign Economic Relations and the tax authorities and submit
a long list of documents. Companies wanting to do business in
Azerbaijan should be aware that the registration processes leading
to the opening of a bank account may take several months.

Can an Azerbaijani company
open a foreign currency account?

Yes. A company established
in accordance with the laws of Azerbaijan (ALE), including joint
ventures and wholly owned subsidiaries of foreign companies,
can open foreign currency bank accounts and must deposit foreign
currency receipts into these accounts. However, there are restrictions
on what an ALE can and cannot do with foreign currency.

For example, there are only four purposes outlined by the National
Bank instructions for which an ALE may withdraw foreign currency.
Similarly, there are only four purposes for which an ALE may
purchase foreign currency at the Baku Interbank Currency Exchange
(BICE). These include the payment of dividends and settling of
invoices with foreign suppliers. In addition, 30% of the foreign
currency earnings of an ALE must be converted into local currency
through BICE.

Can an ALE repatriate profits?

Yes. A joint venture
incorporated in Azerbaijan or a wholly owned subsidiary of a
foreign company may purchase foreign currency at BICE for the
payment of dividends provided that tax obligations have been
met.

Can an ALE invoice its clients
in foreign currency?

Yes. However it must
first obtain a foreign currency license from the National Bank.
It is our understanding that significant justification for the
need for a foreign currency license must be present in order
for the National Bank to issue a license. The instructions from
the National Bank specifically rule out the issuance of licenses
on the grounds of currency depreciation risk. It is also our
understanding that very few licenses have been issued in recent
months.

Can an ALE open a bank account
outside the Azerbaijan Republic?

There are draft instructions
being considered by the National Bank which would require its
consent before permission is granted for an ALE to have a bank
account abroad. These draft instructions also outline a limited
number of purposes for which an account may be opened abroad.

Can an FLE or an ALE pay
its employees in foreign currency?

An FLE can pay its employees
in foreign currency, and the instructions from the National Bank
state the payment of salaries as a valid purpose for which foreign
currency may be withdrawn from an account. An ALE, however, must
pay its employees in local currency.

Are there any restrictions
on the cash operations of an FLE or an ALE?

Yes. In the case of
an ALE there are considerable restrictions on cash transactions
in both local and foreign currencies. In an attempt to move away
from a largely informal cash economy, Azerbaijani officials have
set strict limits on the amount of cash a legal entity (foreign
or Azerbaijani) may withdraw from the bank each month. In the
case of an FLE, however, the more flexible operational rules
with respect to foreign currency afford it a less cumbersome
burden of compliance, although an FLE is bound by the same restrictions
as an ALE with respect to cash operations with local currency.

Please note that the above article is of a general nature and
specific advice should be sought in all instances. Ernst &
Young is the largest and most experienced firm of professional
advisers in the CIS.

Alum Bati is the Representative Director of Ernst & Young
in Baku. He and his team of specialists will be happy to answer
your questions on currency. Please contact, in the first instance,
Alum Bati, or Robin Bennett, the Managing Partner, or Nader Alizadeh.
Ernst & Young is located at 11 Mardanov Qardashlari Street
(formerly Gogol), Suite 32 (near the Visa & Registration
Office). Tel: (99412) 98-33-85; 94-14-13; Fax: (99412) 98-33-85;
93-73-12; 98-64-82; e-mail <ab@ernst young.baku.az>.